Stocks in India Surge; Inflation Drop to 0.27%

123jump.com Staff
26 Mar, 2009
New York City

Stocks in Mumbai surged on a sharp fall in inflation. The latest wholesale price index in the week of March 14 dropped to the lowest level in the last two decades. Reliance Industries is expected to start the natural gas shipment in April.

[R]9:00PM Mumbai, 11:30AM New York – Stocks in Mumbai surge on a fall in inflation.[/R]

In Mumbai trading stocks surged on a sharp fall in wholesale inflation and improved credit flow in rural markets and expectations that the government stimulus will lift economic growth.

The Sensex Index surged 335.20 or 3.47% to 10,003.10 and the index is now up 22.6% in the last two weeks of trading. The CNX Nifty 50 index closed up 3.3% or 97.90 to 3,082.25.

Of the stocks traded on the BSE, 1,394 increased and 1,163 declined and 56 were unchanged. Of the 30 stocks in Sensex, 27 increased and 3 declined.

Trading on BSE surged to 4,607 crore rupees from 4,097 crore rupees a year ago.

Wholesale Inflation Index Falls

Wholesale price index in the week to March 14 rose at 0.27% after rising at 0.44% at the end of previous counting twelve months. The broader measure of the inflation index may dip further in the weeks to come helping Reserve Bank of India to make its interest rate decision.

While wholesale price index is expected to dip into a negative territory consumer prices are still high and are expected to remain high. Consumer price index for farm workers rose at 11.62% in January and increased at 10.4% in the month for urban wage earners. The both indexes have dipped from a high of more than 12% in the recent months and are expected to decline further.

The consumer prices are high because supply is still lagging the demand when the demand is still on the rise. Food price inflation has declined from a high of 10% to 7.35% in the first week in March.

Credit flow appears to be improving and the latest data for the last two weeks showed that the credit available to rural markets increase to 22,423 crore rupees.

The rupee in trading closed at 50.70 against a dollar from previous close of 50.75 as foreign investors increased the fund flows to invest in local companies stocks. According to the National Stock Exchange foreign institutional investors increased the net investment in stocks by 348.65 crore rupees.

Reliance Sets Natural Gas Price

Reliance industries Ltd is expected to start natural gas shipment to priority fertilizer units and designated power plants at a price agreed by the government. The Bloomberg News report suggests that the gas price was set by the government at $4.20 mBtu excluding shipping costs and taxes.

The daily output from Krishna Godavari basin is expected at 15 million cubic meters and increase to 40 million cubic meters in July and 80 million cubic meters in 2010.

The government has allocated 18 million cubic meters to power plants, 5 million cubic meters for household needs and transportation and 3 million cubic meters for LNG gas units.

Gainers & Losers

Reliance Industries Ltd increased 2.2% to 1,566.55 as it finalizes its agreement to sell natural gas to government controlled entities and fertilizer companies with shipments beginning in April. Reliance also paid 16% lower tax of 370 crore rupees in the quarter ending in March compared to a year ago quarter.

Oil marketing companies controlled by the government increased after the government issues oil bonds totaling 10,000 crore rupees. Indian Oil Corporation is given bonds of 5,817 crore rupees, Bharat Petroleum Corporation is issued 2,144 crore rupees and Hindustan Petroleum Corporation of 2,038 crore rupees.

Software exports companies increased on the hopes that exports to the U.S. will hold in the current year. The market leader TCS increased 6% and Infosys increased 3% and Wipro increased 5%.

Tata Motors surged 8% and Maruti Suzuki increased 5.1%. Maruti is expected to launch small car priced between 4 lakh and 5 lakh rupees. Hero Honda Motors rose 1.8%.

Banks increased in trading. State Bank of India rose 4% after it reported advanced tax payment increase of 28% to 1,810 crore rupees. HDFC Bank increased 1.4% and it reported increase of tax payment of 10% to 275 crore rupees.

Larsen & Toubro surged 6.1% Hindustan Lever increased 1.9%.

Akruti City led the list of most active stocks with a turnover of 545 crore rupees followed by Reliance Industries of 370 crore rupees and Motherson Sumi with 206 crore rupees.